One of the recent hot topics in the European restructuring market has been whether the UK Courts would sanction a scheme of arrangement in relation to a foreign company, with no previous connection to the UK whatsoever, where the sole basis for establishing jurisdiction to undertake the scheme would be amending the governing law and jurisdiction clauses of the company’s principal finance documents to English law. This question was answered on 14 April 2014 when the High Court of Justice (the “Court”) approved a scheme of arrangement (the “Scheme”) in relation to nine companies of the German based Apcoa Parking group (“Apcoa”). Apcoa has no connection to, or assets in, the UK at all and its indebtedness was governed by a facilities agreement (the “Facilities Agreement”) which was subject to German law and the exclusive jurisdiction of the courts of Frankfurt/Main. However, by majority lender vote in accordance with the terms of the Facilities Agreement, the governing law and jurisdiction clauses were amended to English law for the sole purpose of establishing jurisdiction of the Court to proceed with a UK scheme.

Key Points

- Apcoa had no other basis on which to establish jurisdiction to conduct the Scheme;

- The Court accepted jurisdiction on the basis of the amended governing law and jurisdiction clauses and sanctioned the Scheme and thus opened a new avenue to establish jurisdiction;

- The Scheme enabled Apcoa to change material terms of the Facilities Agreement which would otherwise have been subject to unanimous consent and thus overcame minority lender opposition;

- Apcoa successfully executed the Scheme with respect to its group which included German, Austrian, Belgian, Norwegian and Danish companies and thus reaffirmed and extended widespread geographical availability of a UK scheme of arrangement; and...

This publication is prepared for the general information of our clients and other interested persons. It is not,
and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be
regarded as legal advice.
May 2014
Insight: Financial Restructuring & Insolvency
Apcoa Parking: Availability of
UK Scheme of Arrangement to
foreign corporates extended
One of the recent hot topics in the European restructuring market has been whether the UK
Courts would sanction a scheme of arrangement in relation to a foreign company, with no
previous connection to the UK whatsoever, where the sole basis for establishing jurisdiction
to undertake the scheme would be amending the governing law and jurisdiction clauses of
the company’s principal finance documents to English law. This question was answered on
14 April 2014 when the High Court of Justice (the “Court”) approved a scheme of
arrangement (the “Scheme”) in relation to nine companies of the German based Apcoa
Parking group (“Apcoa”). Apcoa has no connection to, or assets in, the UK at all and its
indebtedness was governed by a facilities agreement (the “Facilities Agreement”) which
was subject to German law and the exclusive jurisdiction of the courts of Frankfurt/Main.
However, by majority lender vote in accordance with the terms of the Facilities Agreement,
the governing law and jurisdiction clauses were amended to English law for the sole purpose
of establishing jurisdiction of the Court to proceed with a UK scheme.
Key Points
■■ Apcoa had no other basis on which to establish jurisdiction to conduct the Scheme;
■■ The Court accepted jurisdiction on the basis of the amended governing law and
jurisdiction clauses and sanctioned the Scheme and thus opened a new avenue to
establish jurisdiction;
■■ The Scheme enabled Apcoa to change material terms of the Facilities Agreement which
would otherwise have been subject to unanimous consent and thus overcame minority
lender opposition;
■■ Apcoa successfully executed the Scheme with respect to its group which included
German, Austrian, Belgian, Norwegian and Danish companies and thus reaffirmed and
extended widespread geographical availability of a UK scheme of arrangement; and
■■ The case confirmed that there is currently no other tool in the European restructuring
market that allows for more efficient and flexible corporate restructurings than a UK
scheme of arrangement.
The Background
Apcoa is a German ‘parking solutions’ company with operations in the UK, Austria, Denmark,
Germany, Norway and Belgium. The group is financed, inter alia, through a Facilities
Agreement, comprising a senior revolving credit facility of £33.83 million, a senior term loan
of €595 million and second lien debt amounting to €65 million. The debt under the terms of
the Facilities Agreement was due to mature on 25 April 2014, and the group’s ongoing
restructuring was not due to be completed by this time. The group sought to implement the
Scheme to extend the maturity date initially to 25 July 2014 with the option to further extend
the debt by three months with the consent of a qualified majority of creditors. Without the
Scheme such amendment would have required unanimous consent of all of the creditors.
Christian Pilkington
Partner, London
+ 44 20 7532 1208
cpilkington@whitecase.com
Laura Prater
Partner, London
+ 44 20 7532 1306
lprater@whitecase.com
Boris Docekal
Associate, London
+ 44 20 7532 1000
bdocekal@whitecase.com
David Plch
Partner, Prague
+ 420 255 771 298
dplch@whitecase.com
Leila Roeder
Partner, Frankfurt
+ 49 69 29994 1568
lroeder@whitecase.com
ATTORNEY ADVERTISING
The Scheme
A scheme of arrangement is a Court
supervised process which aims to
implement an agreement without the need
to obtain the consent of all of the parties.
Strict procedures need to be complied with,
including the need for an initial convening
court hearing (the “Convening Hearing“),
a vote of the creditors in a meeting and a
sanction court hearing (the “Sanction
Hearing“). At the Convening Hearing,
the Court will consider whether creditors
should be separated into classes and
whether there is any obvious impediment
to the approval of the scheme of
arrangement. The Sanction Hearing is
where the court’s approval is sought for
the scheme of arrangement to become
effective. To achieve the statutory threshold,
Apcoa needed the support of 75% in value
and a majority in number of the creditors
present and voting at the meeting.
Jurisdiction – the Scheme
The Court has jurisdiction to sanction a
scheme in relation to a “company” which
is defined as “any company liable to be
wound up under the Insolvency Act 1986”.
Sections 220 and 221 (1) of the Insolvency
Act 1986 give the Court the power to wind
up a foreign company. The Court can
therefore sanction a scheme in relation to
a foreign company where there is a
“sufficient connection” to the English
jurisdiction to justify the Court sanctioning
a scheme. Two methods are often used to
establish sufficient connection:
1. Centre of Main Interests (“COMI”):
there is an established process for
shifting COMI of financial holding
companies to the UK, and a COMI within
the jurisdiction has been held to amount
to a sufficient connection; or
2. Governing Law and Jurisdiction Clauses:
in recent years, a number of debt
restructurings of non-UK incorporated
companies have been accomplished
where the scheme of arrangement
was based on English governing law
of the underlying finance documents
(Re Rodenstock [2012] BCC 459;
Re PrimaCom (No. 2) [2013] BCC 219;
and Re Nef Telecom BV [2012] EWHC
2944 (Ch)).
The Change of Governing
Law and Jurisdiction
Apcoa sought to establish jurisdiction
through its governing law and jurisdiction
clauses. However, unlike Rodenstock and
the other cases noted above, the governing
law and jurisdiction clauses of their Facilities
Agreement were not that of England/
English law.
Therefore, in accordance with the
amendment provision in the Facilities
Agreement the governing law and
jurisdiction clauses were changed from
German law to English law. This change
was effected by the consent of the majority
lenders – 66.6% of creditors were required
to vote in favour of this change and 86% of
creditors voted in favour (with 5.5% voting
against the change). Importantly, the Court
also received expert evidence from local
German expert – Professor Paulus – to the
effect that the change of governing law and
jurisdiction clauses, and the Scheme itself,
would be likely to be recognised in the
countries where the group companies
were incorporated.
The Decision
The Court determined that, through the
amendment of the governing law and
jurisdiction clauses, there was a sufficient
connection with the UK, and the Scheme
was sanctioned. Consent was sought
from 83 of the 93 creditors (with the other
10 abstaining). Creditors’ votes by value in
support of the Scheme reached between
86.89% and 100% of the relevant
outstanding indebtedness.
The Court did highlight that it is important
that the creditors were fully informed as
to the alteration of the finance documents,
and if the creditors were not aware that the
purpose of the change to the governing law
and jurisdiction clauses was so that
a scheme of arrangement could be
implemented, then the Court may not have
granted jurisdiction. In Apcoa, evidence of
telephone calls purporting to fully inform
the creditors was enough to satisfy the
Court that the creditors were fully informed.
Conclusion
Even prior to the Apcoa decision, the use
of schemes of arrangement to effect the
restructurings of overseas companies
was becoming increasingly widespread.
However, the decision in Apcoa has
established a relatively simple route for
foreign companies to establish jurisdiction of
the Court even where it has no connection
to the UK whatsoever and, therefore, has
potentially expanded the ambit of schemes
significantly. The net effect of Apcoa is that a
foreign company does not necessarily have
to move its jurisdiction of incorporation or
COMI to the UK, and can now effect a
scheme of arrangement where its only
connection to the UK results from a change
of governing law and jurisdiction under its
finance documents. The decision may also
affect holders of the bond market more
acutely, where the standard documentation
usually allows a change of jurisdiction by
approval of holders of just 50%+1 of the
bond principal. Going forward, the decision
has made the UK an even more accessible
jurisdiction to restructure foreign companies
and confirmed the scheme of arrangement’s
position as the international corporate rescue
tool of choice for distressed companies.
whitecase.com
Prior results do not guarantee a similar outcome.
In this publication, White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership,
White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.
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